IiAS pointed out that besides the 19.42% voting rights, the 4.88% equity held by Sharma Family Trust in the company should also be considered as Sharma’s shareholding
Earlier this week, Paytm informed about Sharma acquiring the 10.3% stake of Antfin’s shareholding in the company
IiAS noted Sharma's transformative role in Indian mobile payments, with investors supporting his ideas and his ability to deliver strong results
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After the transfer of the shares from Antfin, Paytm boss Vijay Shekhar Sharma, along with the equity holding of the family trust, is arguably in control of 24.3% of voting rights in the company, according to Institutional Investor Advisory Services (IiAS).
Earlier this week, Paytm said that founder and CEO Sharma would acquire 6.53 Cr shares or a 10.3% stake in the fintech major from Netherlands-based Antfin Holdings BV. This move would increase his overall ownership in the company to 19.42%.
IiAS pointed that besides the 19.42% voting rights, the 4.88% equity held by Sharma Family Trust (Axis Trustee Services) in the company should also be considered as Sharma’s shareholding.
“We continue to believe that Vijay Shekhar Sharma will have influence over how the 4.88% equity held by the trust will vote on shareholder resolutions, giving him effective control of 24.3% of the voting rights,” said the Indian proxy firm.
IiAS further highlighted that Sharma has revolutionised mobile payments in India and investors have backed him for his ideas and the belief that he is the driving force behind the business and capable of delivering “punchy numbers”.
In fact, despite the significant erosion in shareholder wealth from the listing price, the company’s cash burns, absence of profitable growth, and the perception that Sharma is overpaid, investors have remained positive, the report said.
It is pertinent to note that Paytm shares had slumped 60% in 2022 alone. After a significant recovery since around March this year, the fintech major’s shares are still trading over 50% lower than their listing price.
While aggressively chasing profitability, Paytm’s net loss has witnessed a 44.5% year-on-year (YoY) decline to INR 358.4 Cr in Q1 FY24. However, its loss almost doubled compared to the previous quarter.
Despite these challenges, Sharma secured shareholders’ approval last year to continue as the company’s MD and CEO for the next five years.
IiAS emphasised that it is Sharma who continues to hold the company together.
“It’s time Vijay Shekhar Sharma formally signals that he remains in control. He needs to give investors the comfort that he is the promoter and not someone who is sitting in the shadows,” the firm said.
Earlier this year, IiAS expressed concerns over the potential bypassing of regulations by Paytm in granting employee stock options (ESOPs) to Sharma. The proxy firm alleged that Sharma enjoyed the rights of a promoter, including the potential for a board seat, even when he wasn’t listed as one.
The proxy firm had urged the Securities and Exchange Board of India (SEBI) to examine Sharma’s decision to trim his direct stake in Paytm by transferring his shares to a family trust.
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